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Immigrants More Likely Than U.S.-Born to Be Entrepreneurs

Courtney Rubin

Business Writers

Immigrants are more likely than U.S.-born workers to start small businesses—but their businesses tend to be smaller, says a new report.

Nearly one in five small-business owners (18 percent) were born abroad, though immigrants make up just 13 percent of the population and 16 percent of the labor force, says a study from the nonprofit Fiscal Policy Institute's Immigration Research Initiative.

The Big Climb

Immigrant-owned small business—defined as those with at least one and fewer than 100 employees, and in which more than half of the owners were immigrants—has jumped 58 percent since 1990. (There were 3.1 million such businesses in 1990; in 2010 there were 4.9 million.) They were responsible for 538,551 new small businesses during the 20-year period, or roughly a third of all those created.

Small businesses with foreign-born owners account for nearly $1 trillion of the U.S. economy, according to the report. In 2007, the most recent year for which data was available, they totaled $776 billion in receipts and employed 4.7 million people, 14 percent of all people employed by small business. But immigrant small-business owners had $63 billion in annual personal income—just 15 percent of the $419 billion in personal earnings (wage and salary plus the proprietor's earnings) from small businesses overall.

"Immigrant business owners tend to have smaller businesses than U.S.-born owners, as indicated by a smaller share of earnings than of the number of business owners," said the report.

The Impact of Immigrant Small Businesses

David Dyssegaard Kallick, director of the FPI’s Immigration Research Initiative and author of the report says that he doesn't think immigrants are "super-entrepreneurs." "But I do see that immigrants are playing an important and growing role across the American landscape. And it’s not just traditional immigrant gateways, it’s all around the country."

Labor economist Mark Price of Pennsylvania's nonprofit Keystone Research Center said the report confirms what many people knew intuitively.

“Immigrants tend to do a better job of forming small businesses than they represent of the larger economy," he said. “It can be easier to make your way in the U.S. economy as a small-business owner than as an employee.”

The report found Mediterranean and Middle Eastern immigrants are more likely to own a small business than other immigrants. Some 16 percent of the Greek-born labor force owns a small business, while just 1 percent of Mexican immigrants do. (But as the largest U.S. immigrant group, Mexicans do own the largest share of small businesses: 12 percent.)

More than half (54 percent) of laundry and dry cleaners are immigrant-owned and 49 percent of grocery stores are. Foreign-born also make up 43 percent of hotel or motel owners and 37 percent of restaurant operators. More than a quarter (26 percent) of the 143,333 doctors' offices are run by immigrants, and 20 percent of computer systems design companies are.

"Immigrants are playing a particularly important role in the kinds of businesses that bring people into downtown areas and help enliven neighborhoods," Kallick said.